Southern Cross completes debt funding for Sandstone acquisition

THE BOURSE WHISPERER: Southern Cross Goldfields (ASX: SXG) has received indicative term sheets for 100 per cent debt funding for the company’s recently announced acquisition of the Sandstone gold project in Western Australia from Troy Resources (ASX: TRY).

Southern Cross announced the agreement to acquire Sandstone in August for consideration comprising $5 million cash ($2.5 million of which will replace existing environmental bonds), a two per cent net smelter royalty and 43.665 million unlisted Southern Cross options exercisable at ten cents per share.

The Sandstone project comprises a fully permitted 600,000 tonnes per annum gold plant, 100-person camp and 700,000 ounce JORC-compliant gold resource.

The transaction will increase Southern Cross’ combined JORC resource base to 1.3 million ounces.

Southern Cross said it expects the acquisition of the Sandstone plant and camp will halve the estimated capital cost of the company’s Marda gold project, as well as unlock significantly enhanced financial returns, reduce project development risk and provide greater production flexibility.


Combined Marda and Sandstone tenement and Resource package. Source: Company announcement


Simultaneously with the completion of the debt funding process, Southern Cross and Troy are proceeding positively toward completion of formal documentation for the acquisition.

Southern Cross said it was pleased with the progress of the debt funding process, indicating the indicative term sheets it has received reflect the transformational nature of the Sandstone acquisition for the company and the strength and quality of its key assets.

“The debt markets are currently very much open for business and we are focussed on securing a competitive financing package that will enable us to move ahead with completion of this important transaction and put SXG on a clear pathway to gold production in 2013,” Southern Cross Goldfields managing director Glenn Jardine said in the company’s announcement to the Australian Securities Exchange.

Southern Cross said financing activities to secure debt funding for the Marda project have also progressed.

The company has received indicative term sheets, which it considers to be in line with its expectations and previous announcements.

Evaluation of the indicative term sheets is underway with short-listing to follow.

Southern Cross said debt financing for the Marda project is expected to be finalised in the December 2012 Quarter.